Question

Determine current portion of long term note payable On January 1, Irving company purchased equipment of 280,000 with a long term note payable. The debt is payable in annual installments of 56,000 due in December 31 of each year. At the date of purchase, how will Irving company report the note payable?

Answer 1

The current portion of any long term liability is the amount which is due in the current year of the balance sheet. So in this case the current portion of the long term note payable is $56,000 as it is the amount which is due within the current balance sheet year.

Debit Credit

Equipment 280,000

Long term Note payable 280,000

Long term Note payable 56,000

Current portion of long term note 56,000

First we will debit equipment because an asset is increasing and credit long term note payable because a liability is increasing.

Then we will debit long term note payable as a portion of the long term note is a current liability, and we will thus credit current portion of a long term note.

Step-by-step explanation: